Uneven Recovery: Needs mount, housing programs underfunded

Back in 2004, before the housing bubble burst and America headed into the worst recession since the Great Depression, Minnesota developed a good “game plan” for ending homelessness.

Find more articles in the Uneven Recovery series, an ongoing collaboration between Minnesota 2020 and Minnesota Housing Partnership.

It didn’t get a chance to work, recalls Liz Kuoppala, executive director of the Minnesota Coalition for the Homeless. The game changed. Minnesota went from an estimated 9,000 homeless on any given night back then to 14,000 now, based on Wilder Research calculations.

The Great Recession bankrupted families, turned homeowners into renters, and some renters became homeless, Kuoppala said. The slow economic recovery since has held back construction of new homes and apartments, prevented repairs and rehabilitation of properties that are desperately needed, and forced rental prices out of reach for low-income families.

As noted in this Uneven Recovery series, Minnesota neighborhoods, cities, counties and regions have experienced mixed results in coming out of the housing crisis. Unfortunately, the range of recovery appears to stretch from modest to nonexistent.

In this final article in the series, Minnesota 2020 and Minnesota Housing Partnership turn to calls for action.

At the state level, more than 100 Minnesota organizations are engaged with the Homes for All alliance and are pushing the Minnesota Legislature for $100 million in bonding authority for housing. This bonding would include $80 million in housing infrastructure bonds and $20 million in general obligation bonds.

“Bonds are our best tools at the state level, especially for smaller cities in Greater Minnesota,” said Kuoppala. “The Feds have got to do their part, and they keep cutting back. We need to do what we can in Minnesota.”

With the bonding dollars for housing before the Minnesota Legislature, Minnesota Housing Finance Agency would award funding competitively for supportive housing, preservation of affordable rental housing and foreclosure recovery. General obligation bonds would be used for repair of public housing, which is in tremendous need of restoration all across the state.

Housing groups and developers of affordable housing could undertake hundreds of millions of dollars’ worth of projects to make housing available and affordable to low-income people, if funds were available. Similarly, the Minnesota Interagency Council on Homelessness updated the state government’s plan in December to fight homelessness, starting with ending homelessness for veterans in the next two years. Securing sufficient funding is a key strategy within the plan.

State efforts to make homes affordable, however, only have so much impact and require federal resources to better meet needs.

Housing advocates and their community development allies watch annual battles over funding existing programs while Congress is also looking down the road at tax policy proposals. Both these public policy exercises will have major impacts on housing, new home construction, and rehabilitation of existing housing for low-income people.

Federal tax policy changes promise powerful tools to support housing for lower income families. Reform of the mortgage interest deduction for homeowners to help low income renters and homeowners is one such proposal. And, advocates want to preserve a tax credit program, the Low Income Housing Tax Credit, a key tool in producing much of the nation’s new affordable rental housing.

One force behind housing tax policy change is, Rep. Keith Ellison, D-Minn., who introduced the Common Sense Housing Investment Act bill a year ago. It would make additional funds available for the National Housing Trust Fund through reform of the mortgage interest deduction, including capping tax benefits for homes with mortgages over $500,000. Ellison’s bill would also provide additional funding for Public Housing and Low Income Housing Tax Credits.

Sheila Crowley, president and chief executive of the National Low Income Housing Coalition in Washington, said during a December interview with MN2020 that Ellison’s bill would be incorporated into more sweeping tax legislation and not “stand alone.” But, she added, introducing bills and picking up cosponsors are important steps in getting housing initiatives before the tax writing panels.

That is exactly what has happened. In a summary of tax policy analysis and reviews sent to Minnesota housing groups, MHP executive director Chip Halbach noted Congress isn’t likely to complete major tax legislation work this year. At the same time, coalition groups such as the United for Homes campaign and Affordable Rental Housing A.C.T.I.O.N. Campaign were buoyed to find bipartisan housing proposals, including elements of Ellison’s bill, included in the Feb. 26 draft tax legislation proposed by Rep. Dave Camp, R-Mich., who is the chairman of the House Ways and Means Committee. This document will form a basis for next year’s tax policy-making.

Of more immediate concern is what happens to programs dependent on federal budgets.

Early this year, Congress passed an omnibus spending bill that kept the government operating, and it passed the long-delayed federal farm bill as well. The first of these cut funding but kept alive housing programs through the Departments of Housing and Urban Development (HUD), Treasury and Justice, and the Veterans Administration; the farm bill kept rural housing programs from expiring.

Housing program budgets have become especially important nationwide since congressional failure on past spending bills led to automatic program funding cuts known as sequestration. These cuts took 70,000 low-income families out of the housing voucher system nationwide that helps pay rents in private housing, noted the Center on Budget and Policy Priorities.This included 1,994 Minnesota families who lost housing assistance, a 6 percent decline since December 2012

As earlier articles in this series showed, the “Uneven Recovery” has disproportionately impacted low-income families. The need for housing help didn’t go away; sequestration cuts only made matters worse.

Duluth is a case in point, reflecting communities all over Minnesota, said Pam Kramer, executive director of Duluth LISC (Local Initiatives Support Corp) that helps nonprofit organizations with various housing projects.

“We have aging housing stock that needs repair and rehab work. We have only a 1.5 percent vacancy rate. We need the full range of new housing from affordable for working households on up to market rate housing.”

Groups and government agencies LISC works with need access to both state bonding help and “fully funded” federal housing programs, Kramer said. And echoing what community leaders and housing and development officials say all across the state, she added, “This is no time to cut back on housing funding when it is so closely tied to economic development.”

  • We are failing the homeless because groups like the Minnesota Homeless Coalition have stopped listening to the homeless. They have become so focused on 1 thing that the ignore other things that contribute to homelessness. The moment we stopped listening to the homeless we have failed. I spent three years homeless and was harassed, exploited and slandered by a homeless advocate. That turned into cyber bulling. When I and others went to the Mn Homeless Coalition begging them to look into this we were told it wasn't their problem and would not even look at the documents or hear us out. How can we solve homelessness if groups who claim to advocate for the homeless won't even listen to the homeless. - by Greg Staffa on Fri, 03/14/2014 - 11:40am

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Lee Egerstrom's picture
Lee Egerstrom

Lee Egerstrom is an Economic Development Fellow at Minnesota 2020.